In today’s blog, we will discuss key updates of IDFC First Bank in Q3FY21. The three main aspects that we will discuss are – Customer deposits, CASA Ratio and Asset book.
IDFC First Bank - 3 Point Analysis
Customer Deposit
IDFC First Bank has registered phenomenal growth in deposits on YoY as well as sequential basis.
The key reason behind this phenomenal growth is attractive interest rates offered by bank. However this will increase bank’s cost of funds and in turn deteriorate Net Interest Margin (NIM)
Retail deposits of the bank which include CASA and term deposits have increased by whooping 100% on YoY basis and 18% sequentially.
However, wholesale deposits have gone down 26% on YoY basis and 5% on QoQ basis.
Thus, we can see that bank is taking completely retail oriented approach in terms of deposits. Also bank is de-risking their deposit mix by reducing the concentration of top 20 deposit holders as shown below:
CASA
CASA stands for current and savings account. Bank has to pay lower interest rates i.e. low cost of funds on these deposits. Thus higher the CASA %, higher is bank’s profitability.
As seen, bank is continuously increasing its CASA ratio over the last few quarters.
Total Funded Assets
Bank is undergoing asset restructuring to build a retail oriented loan book.
The growth in this quarter is mainly driven by retail assets.
Thus, bank is becoming retail oriented from both asset as well as liability perspective.
Even in priority sector lending buyouts, 64% loans are retail in nature in this quarter.
Risks
Although bank’s wholesale loan book is shrinking, impact of moratorium on the wholesale loan book is still unknown.
Its impact will be known in this quarter once the bank comes out with the results.
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